Inflation Concerns Rising

By Howard Schneider

WASHINGTON (Reuters) – Recent data on consumer inflation showed that price pressures might be intensifying, largely due to rising import taxes imposed by the Trump administration, according to Atlanta Fed President Raphael Bostic.

“We may be at an inflection point,” Bostic mentioned during an interview with Fox Business’ Claman Countdown, a day after June data indicated that prices rose faster than the previous month, particularly for heavily imported goods. “The headline number moved away from our target, not towards it… We’ve seen the highest increase in prices that we’ve seen all year.”

The Consumer Price Index (CPI) surged by 2.7% in June, compared to 2.4% in May. Bostic observed that almost half of the products saw price increases of 5% or more, nearly double the share from January. This metric has been a focal point for Bostic, indicating that inflationary pressure is broadening across the economy.

“We are seeing underlying trends in the economy suggesting inflation pressures are rising, and that’s a significant concern,” Bostic stated. Although he is not a voting member on rate policy this year, he expressed that the Fed should wait for more data before considering any rate cuts, suggesting that only a single quarter-point reduction may be justified this year due to uncertainties regarding tariff impacts on prices.

Investors are anticipating two cuts starting at the Fed’s September meeting.

“The price pressures are real,” Bostic asserted, referring to discussions with regional business leaders.

The Fed’s focus on inflation driven by tariffs, coupled with reluctance to reduce interest rates, has frustrated President Donald Trump, who advocates for significant cuts to the Fed’s current benchmark rate of 4.25% to 4.5%.

Reports surfaced on Wednesday that Trump was nearing a decision to attempt to fire Fed Chairman Jerome Powell, leading to a sell-off in stock and bond markets. The situation reversed after the president clarified he does not intend to dismiss Powell, despite his expressed desire to replace him.

Bostic remarked that he avoids focusing on the numerous news reports concerning the Fed, emphasizing, “We’ve got a very complex situation in terms of the economy,” and concentrating instead on “the things that actually matter.”